The euro is fairly stable today - the common currency is trading sideways against the US dollar, the British pound and the Japanese yen. The euro is slightly higher against the Australian dollar and the Canadian dollar. Yesterday, the euro strengthened against the US dollar as risk sentiment rebounded. Unfortunately the euro was no match for the British pound, and ended the day weaker against GBP.
Looking at EUR/USD, the pair continues to trade in a tight range between 1.22 and 1.25. While the currency has strengthened over the past two sessions, the euro's recent strength has been accompanied by declining trading volumes. This suggests that buyers lack conviction. Turning to economic data, yesterday's German wholesale prices were below estimates. As both growth and inflation data from the region continues to decelerate, the outlook for the euro is worsening accordingly. In a commentary published last week, we wrote that the euro is likely to enter a neutral trend later this year. If the ECB fails to end its asset buying program, expect a significant sell-off in the common currency. Our short-term outlook on the euro is neutral, while our medium-term outlook is bullish.
EUR/USD is flat and trading above 1.2380. The euro is flat against the yen, with EUR/JPY trading above 132.50. Finally, the euro is flat against the pound, with EUR/GBP above 0.8630.
Looking at this week’s economic data from the Eurozone, we’ll see sentiment data and final inflation figures for March. YoY German wholesale prices for March (1.2% vs. 1.5% expected) were below consensus estimates. Later today, we’ll get the ZEW Survey for economic sentiment in April (for both Germany and the Eurozone). On Wednesday, we’ll get the final reading for the Eurozone consumer price index for March. On Thursday, we’ll see the Eurozone current account balance for February. On Friday, we’ll see German producer prices for March and hear a speech from German Bundesbank President Weidmann. We’ll also see Eurozone consumer confidence for April. Last week, the second-take of YoY German consumer price index (1.6%) met expectations.
As the euro runs out of steam, we are downgrading the currency to neutral in the short-term. Looking at various technical indicators, the currency is trading within normal conditions. This is based on a daily chart of the euro currency index.
As the euro continues to strengthen, we are upgrading the outlook to bullish in the medium-term. Note that the euro is currently trading within normal conditions. Our analysis is based on various technical indicators when looking at a weekly chart.